Tag Archives: CME

The Chicago Mercantile Exchange (CME) announced a plan to launch Bitcoin futures by the end of the year. The price of Bitcoin surged to a new record in response to the announcement. It was reminiscent of the dot.com era, when a dot.com stock would jump 10% if Maria Bartiromo merely whispered the name of the company on CNBC.

Ironically, the cheers for this new contract from the Bitcoin faithful could turn out to be analogous to chickens in the barnyard cheering at the appearance of Colonel Sanders.

GATA released an article about the new Bitcoin futures contract titled “So Long Cryptos.” I’m sure that editorial stance puzzled most Bitcoin price-momentum chasers. Crypto aficionados, for now, overlook the fact that CME futures are used aggressively to push around the dollar-based Comex gold and silver futures contracts.

As GATA points out, the ability to manipulate precious metals futures contracts by the official entities motivated to suppress the price of gold is reinforced by the volume trading discounts given from the CME to Governments and Central Banks who trade on the CME.

If there any reason to assume that the same volume discounts will not be extended to the Bitcoin contract? Another curious feature of the Bitcoin contract is that it will be settled in cash. I would point out the original intent behind futures contracts was to enable producers and users to agree ahead of time on a price that would be paid for the delivery of the underlying commodity associated with the futures contract. Futures were a financing tool intended to facilitate the production and distribution of the underlying commodity product.

The Bitcoin futures contract is settled only in cash – U.S. dollars. To wit, does this not theoretically sabotage the intended purpose of Bitcoin, which is to provide an alternative to fiat currencies? Why would you want to receive fiat dollars rather than delivery of the underlying?

Technically this is not a bona fide futures contract. It’s a derivative of the “index” price of Bitcoin but it does not facilitate the production and distribution of Bitcoin. As such, it’s an instrument of pure speculation. By definition, this opens the door to manipulation by the entities who might be motivated to control the price of Bitcoin. Oh, by the way, those entities can buy and sell the contracts at a price advantage to the speculators by virtue of the volume discounts.

At least with gold and silver contracts, the contract enables the contract owner to take delivery of the actual physical commodity connected to the contract. To a limited extent, this mechanism serves to prevent the complete unfettered manipulation of gold and silver via the Comex futures contract.

With the Bitcoin futures contract, the contract owner is paid cash. The absence of a requirement to deliver actual Bitcoins enables the issuance of an unlimited number of fiat dollar-based paper Bitcoin contracts which can be used to drive the price lower by increasing the supply of the contract relative to the demand. So much for the idea that Bitcoin supply issuance is firmly capped. This could actually be quite entertaining to observe

It’s also quite possible that Bitcoin futures could divert hedge fund trading volume away from gold and silver futures. This would be a blessing in disguise if this occurs. The price-momentum chasing hedge fund algo trading enables the Comex bank manipulation of Comex futures contracts. Remove this source of volume and it will remove to some degree the ability of the banks to push the price around by exploiting the hedge fund algos.

If the percentage of open interest in gold and silver Comex futures contracts becomes skewed toward the users of these contracts who actually take bona fide delivery of the underlying physical gold/silver bars because the non-delivery-taking users move over to Bitcoin futures, it could mitigate the ability of the banks to price-cap the price of gold/silver.

In this regard, investors who prefer to keep their wealth stored in physical gold and silver rather than fiat dollars or fiat Bitcoins will indeed welcome the new Bitcoin futures product.

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While no additional silver was put on deposit at the Comex during the [past] week, The Banks sold contracts for 120MM oz. This is fraud. -@TF MetalsReport

If you were to poll the public about comparing the investment returns between gold, silver and stocks during the first quarter of 2017, it’s highly probable that the majority of the populace would respond that the S&P 500 outperformed the precious metals. That’s a result of the mainstream media’s unwillingness to report on the precious metals market other than to disparage it as an investment.

In reality, among silver, gold, the Nasdaq 100 and the S&P 500, the S&P 500 had the lowest ROR in Q1. Silver led the pack at 14%, followed by tech-heavy Nasdaq 100 at 11.1%, gold at 8.6% and the S&P 500 at 4.8%. Put that in your pipe and smoke it, Cramer. Imagine the performance gold and silver would have turned in if the Comex was prevented from creating paper gold and silver in amounts that exceeded the quantity of gold and silver sitting in the Comex vaults.

As an example, as of Friday the Comex is reporting 949k ozs of gold in the registered accounts of the Comex vaults and 9 million ozs of total gold. Yet, the open interest in paper gold contracts as of Friday totaled 41.7 million ozs. This is 44x more paper gold than the amount of physical that has been designated – “registered” – as available for delivery. It’s 4.6x more than the total amount of gold sitting on Comex vaults.

With silver the situation is even more extreme. The Comex is reporting 29.5 million ozs of silver as registered and 190.2 million total ozs. Yet, the open interest in paper silver is a staggering 1.08 billion ozs. 1.08 billion ozs of silver is more silver than the world mines in a year. The paper silver open interest is 5x greater than the total amount of silver held in Comex vaults; it’s an astonishing 37x more than the amount of silver that is available to be delivered.

This degree of imbalance between the open interest in CME futures contracts in relation to the amount of the underlying physical commodity represented by those contracts never occurs in any other CME commodity – ever. Historically, when the amount of paper exceeds the amount of underlying commodity that is available for delivery by more than 20-30%, the CFTC intervenes by investigating the possibility of market manipulation. But never with gold and silver.

The Comex is perhaps the most corrupted securities market in history. It is emblematic of the fraud and corruption that has engulfed the entire U.S. financial and political system. The U.S. Government has now issued $20 trillion in Treasury debt for which it has no intention of every redeeming. It’s issued over $100 trillion in unfunded liabilities (entitlements, pensions, etc) for which default is not a matter of “if” but of “when.”

In today’s episode of the Shadow of Truth, we discuss “The Big Lie,” which is also known as the “Comex,” and explain why those looking to protect their savings should be buying physical gold and silver now:

Orwell would blush over what’s being done to our system if he were alive. – Investment Research Dynamics...I think a lot of precious metals futures contracts are going to undergo a disappearing act. – John Titus of BestEvidence

The CME curiously reported that it received notice from the Federal Reserve that it is authorized to open an account at the Fed which would “allow it to better safeguard cash deposited by its traders” CME/Fed Account.

This is event is notable for several reasons. First and foremost is the fact that the CME was designated as a “systematically important” financial institution as part of the Dodd-Frank “hoodwink the taxpayer” Act. If anyone can explain to me why a corrupted derivatives clearinghouse and trading exchange is “systematically important,” I will receive the explanation with an open mind.

To be quite frank, no bank is systematically important, especially the big banks which are continuously wrist-slapped for committing criminal acts of fraud and screwing the public. As has been demonstrated, the “systematically important” designation is nothing more that a guarantee to the banks that Taxpayer money will be tapped to ensure bonus payments may remain uninterrupted in the event of a bank collapse.

Another puzzling aspect of the CME’s decision to open a custodial account at the Fed is in the CME’s statement that the Fed account will allow it to better “safeguard” cash deposited by its traders. Note that the account is limited to “clearing members proprietary margin” accounts. This would be the cash put up by Comex clearing members – like the Too Big To Fail Banks (JP Morgan, Goldman, Citi, HSBC etc) – against margin requirements.

Why is a Fed custodial account any better than a custodial account held by a big bank? Is this an unintended signal from the Fed that the big banks are no longer safe as custodians of cash deposits?

To me this reeks of the CME enabling a mechanism that “ring-fences” any cash equity put up by clearing members for the purposes of protecting that cash against an event of default or bankruptcy. It would give the CME control over this cash. This is what occurred when Jon Corzine incinerated MF Global and JP Morgan was able to grab any and all available collateral for its own benefit.

Again, this suggests to me that CME is concerned about the risk embedded in the proprietary futures and derivatives positions of its clearing members. I would suggest that the CME is specifically nervous about the precious metals futures positions held by JP Morgan, HSBC and Scotia.

With the absurd imbalance between Comex gold/silver contracts and the amount of underlying physical gold/silver bars held at the Comex for delivery, it’s not a question of “if” the Comex eventually defaults but a question of “when.” Anyone who disagrees with this assertion is either in a state of pathetic denial or appalling ignorance.

Don’t forget that Comex contracts have a “force majeur” provision which enables the cash settlement of these contracts. Given that the outrageously large short positions in gold and silver futures contracts are primarily held by the big banks, who also happen to be clearing members, the move by the CME to ring-fence cash collateral at the Fed which is deposited by the big banks who are short gold/silver futures expressly suggests that an event of default may be closer than any of us realizes.

Sure, you can’t eat a bar of gold and it just sits in storage like a Pet Rock that’s been cast aside by its bored owner. But try selling the Indians or Chinese a paper gold bar and see how far you get. You might end up with a knife in your forehead.

The stench has been growing stronger by the day. Many of us have been writing for years about the extreme imbalance between the paper futures open interest vs. the underlying amount of gold being reported as available for delivery. The latest disclosure from the CME is that the ratio of paper gold vs. the amount of deliverable ounces has spiked to over 200:1.

As of last Friday, JP Morgan had 89.4k ounces withdrawn from the “customer”/ eligible account in its vault and it moved 122k ounces of gold from its “deliverable”/ registered account into its customer account. What the true nature of those transactions were – i.e. who the counterparties were and did in fact any real gold actually leave JP Morgan’s gold vault – is anyone’s guess due the intentional opacity of disclosure on the Comex.

But the bottom line is that, as of last Friday, the Comex vaults collectively now show 202k ounces of gold in the “registered” / deliverable accounts of the Comex vault custodians. As of today’s trading, the “preliminary” gold futures open interest rose to 419k contracts representing 41.9 million ounces of paper gold. This would, preliminarily, put the ratio of paper gold to deliverable physical gold at an astonishing 207:1 ratio.

The amount of “deliverable” gold on the Comex is the lowest that I’ve seen it in the time I’ve been following the Comex data avidly since 2002. Please note that the preliminary open interest is almost always revised, most typically a bit lower, by the time the Final report is issued the next day. But based on many years of tracking this data, it is likely that any revision will not move the “needle” on that 207:1 ratio by much in either direction.

Nothwithstanding all the other information contained in this disclosure, this number represents the confirmation that the Comex is nothing more than a pure paper gold market. It’s nearly 100% derivatives. It’s the imposition of derivatives by the Fed and the U.S. Treasury – via their agent bullion banks – on the gold market in order to control the pricing discovery mechanism.

In other words, the Comex gold market is now a 100% artificial gold market.

I find it it quite interesting that the elitists overseeing this operation on the Comex are willing to advertise the 200:1 paper:gold ratio when they have the means at their disposal to hide that number or to make it look a lot smaller.

There’s some kind of message they’re sending to anyone who cares about this sort of thing. It’s either “f*ck you” we’re in control” or “help, we’re in trouble on our paper gold short position.” Or a combination of both.

The implications embedded in all three of those possibilities are quite horrifying to contemplate.

It’s quite obvious that there’s a problem with the supply of physical gold that is readily available for delivery. The same is true of the retail silver market, in which available supply at the retail level shrinks by the day. Premiums on a simple roll of 20 silver eagles are now over $5 at big coin dealers claiming to have inventory. Most dealers have been wiped out of most if not all of their entire inventory of silver SKU’s.

In my opinion, that head-splitting 200:1 ratio of paper to deliverable gold on the Comex is the surest sign that the market for gold and silver is in crisis mode. The term “crisis” also describes the state of condition of the U.S. stock market and, ultimately, the entire current U.S. financial and economic system.

[If you really study the patterns] you can actually see the when they turn on and off the algorithm program used to manipulate the gold and silver markets. – Jeff Nielson, Shadow of Truth

Rule of Law has been completely abandoned by the Government and business elite. What remains is a citizenry in this country that has been largely dumbed-down and taught ignore or deny the reality unfolding right before its eyes.

What’s left is an elitist club of political and corporate “leaders” who are using every possible means to keep our system from collapsing, enabling to them to steal or confiscate every last crumb of middle class wealth. If you don’t have enough spare cash to own your own Washington, DC politician, you are middle class – you are not part of “The Club.”

The Shadow of Truth hosted a fascinating conversation (at least we found it fascinating) with Jeff Nielson, of Bullion Bulls Canada.

The lies are getting bigger and bigger to point at which they are now ludicrous or even perverse.

The conversation ranged from the proposals by criminal Keynesian “economists” to abolish cash currency to Jeff’s “One Bank” concept.

With 46% of all transactions by volume in the U.S. conducted using cash – 23% by value – converting to an electronic digital currency system would turn our lives upside down. But more insidiously, it would give the Government a lot more control over your life, not to mention the fact that it would make very easy for the Government to impose a bail-in of the banking system when that inevitability occurs.

Unfortunately, the majority of the zombie-like Americans will likely just shrug it off when the move is made to abolish cash, just like our citizens shrugged off the Patriot Act and ignored the imposition of the NSA into our lives.

Jeff’s “One Bank” concept is based on the fact that a cabal of ultra-wealthy bankers, businessmen and media moguls largely control the western financial and political systems. Jeff explains the idea and how it functions. In my mind, it all starts at the top with the Bank for International Settlements – the BIS.

The discussion include whether or not the Government will eventually make gold and silver illegal and try confiscate the public’s bullion. Jeff sees it as an inevitability and necessary to support a fully electronic currency system.

Without question Jeff is highly intelligent, well thought out and articulate. Whether or not you agree with some or all of his ideas, we can assure you that you will find this discussion to be thought-provoking.

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Steve St. Angelo wrote an interesting article reporting that U.S. silver imports have mysteriously jumped nearly 44% during Q1 2015 vs Q1 2014. As he details, the big increase is not explained by the demand numbers for industrial silver, silver eagles or the Comex warehouse vault silver stocks. (click on graph to enlarge; source: SRS Rocco Report)

I’m wondering if perhaps JP Morgan might be the source of the import demand. JPM is the custodian of the SLV vault. As of the latest data available from the NYSE, the short interest in SLV is 20.6 million shares. This is an 11% jump in short interest over the previous week’s report. The short interest represents 20.6 million ounces of silver that are theoretically/potentially owed to the SLV Trust. If large holders of SLV decide to turn in their shares for redemption of silver bars – and assuming they are not blocked from doing so by the Trustee – which I know is happening with GLD – the SLV Trust would find itself in an awkward position if it can’t honor deliveries.

Furthermore, JPM is also thought to be the largest source of short interest in Comex futures. Many of us have been postulating that, because of the trading behavior in silver over the last 6 months or so, it appears as if there is a physical supply vs. delivery demand problem brewing in silver. This group includes myself, GATA’s Bill Murphy and Sprott Asset’s John Embry. James Turk has pointed out that silver is currently in backwardation in London, which means there is a short term shortage of physical silver available for delivery into LBMA forward contracts.

To put the Comex silver open interest in perspective, as of the latest open interest report, there were 116,606 open contracts for the July delivery month. This translates into 583 million ounces of silver. As of the latest warehouse stock report, there were 60 million ounces of silver available for delivery in the “registered” account. click to enlarge:

In other words, nearly 10 ozs of paper silver has been sold to buyers for every ounce of real silver that is available for delivery. This is just for July. You don’t have to be Einstein to understand the potential force behind a short squeeze if just 20% of the longs on the Comex decide to stand for delivery in July because they are nervous about the dollar/economy.

Between the short interest in SLV, the high probability that a significant portion of SLV silver has been hypothecated in some form, and the enormous naked short interest position in Comex silver futures vs the alleged amount of silver stock available to deliver on the Comex, it’s entirely possible that a huge short squeeze in physical silver is fomenting. Perhaps it was JP Morgan and other bullion banks who were responsible for the enormous amount of silver imported into the U.S. during Q1 2015 as a means of partially covering their naked short position in silver via Comex futures, SLV short interest and OTC silver derivatives.

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As everyone knows, the Fed is highly motivated to keep a lid on the price of gold and silver, as they represent real money in relation to the fraudulent, Ponzi scheme unbacked paper fiat dollars printed by the Fed. Every dollar the price of gold rises invalidates the credibility of the dollar by a dollar.

Ergo, the Fed’s war on gold. The latest evidence was this morning’s raid at the exact opening of the Comex gold pit trading at 8:20 a.m. It’s a daily ritual to hit the price of gold automatically at 8:20 a.m. and then again at 8:30 a.m. 8:30 a.m. is typically when the day’s most “important” economic reports are released. Gold gets bombed automatically regardless of whether the particular report was actually “gold friendly” or not.

Today, a whopping 4,307 contracts hit the Comex instantaneously at 8:20 a.m. To put that size in context, at 8:00 a.m. (EST) the CME was showing a total of 45,000 contracts had traded from 6 p.m. the previous the evening until 8:00 a.m. this morning. That’s an average of 54 contracts per minute over the 14 hour period. All of a sudden someone decides they need to sell 4,307 contracts all at once?

The “art of selling” a big position when you need to sell involves hiding the size of the position from the market and feeding your position into the market over time as the liquidity lets you do it without giving away what you are trying to do.

The Fed’s “art of war” on gold involves dumping large quantities of gold contracts, often at times when it wants to make a statement. The real question in my mind is, why has the Fed all of a sudden become very blatant about its intent to wage a war on gold?

In my view, the Fed’s behavior reflects a growing degree of desperation in its efforts to rig the markets…